Thursday, 13 October 2011

Rights versus Trade-offs: RWC edition.

In the past I have given a talk on to non-economists in the health field on health economics, in which I would start by outlining differences in the way health economists and other health professionals frame issues. One of the main differences in mindset, I claim, is that economists’ focus on allocating scarce resources between competing uses tends to have us pitch policy issues in terms of trade-offs at the margin rather than fundamental rights. So rather than a “right to basic health care”, we would think in terms of health care having a very high value that might have to be traded off against other valuable uses of the same resources. The bottom line is that, if you allocate resources to achieve some absolute right, the envelope theorem suggests that, almost certainly, the marginal unit allocated to that objective could have been better spent elsewhere.
So I am conflicted in thinking about the response of the International Rugby Board to complaints about unfair scheduling of games during the current world cup.

To recap, the 20 teams in the competition were divided into four pools of five teams, with each pool playing a round robin competition to find out which two teams from the pool would proceed to the knockout rounds. The round-robin took place over a period encompassing four weekends (Friday to Sunday), so that it was possible for a team to play one game each weekend, with 6-8 days between each game. Because there were an odd number of teams in each pool, however, there would be one team from each pool not playing in any given weekend, meaning that some games had to be scheduled mid-week, with teams getting only 3-4 days to recover between consecutive games.

The problem then is that maximising television revenue requires that the teams from the major rugby playing nations have their games scheduled for the weekend, leaving the mid-week games for the so-called minnows. This had the unfortunate consequence that the higher ranked teams had an easier schedule than the minnows, giving the latter almost no chance of achieving an upset appearance in the knockout phase.

The IRB defended this by pointing out how they use the revenue from the World Cup to invest in the smaller nations.

So what should I think about this. My gut instinct is that there is no point in having a tournament if the conditions are not to be the same for all teams, or at least if there are differences they should be applied blindly, not based on who the teams are. But my “trade-offs not absolute rights” economist mantra suggests that I should be asking if the benefit of greater revenue exceeds the cost of unfair scheduling. Am I being inconsistent? Probably I am, but I still think the scheduling stank. If that makes me guilty of using moral heuristics rather than thinking carefully about trade-offs, so be it.


  1. What about the underlying assumption that having the major teams play midweek would not maximize revenue?
    Where is the evidence for this?

    Given time zone differences between NZ and say the UK/Euro area, would it not be possible that TV audiences are flexible and there would be the opportunity to targetget (say) a corporate audience with advertising when many corporates are likely to have company breakfasts etc on the day of the bigger midweek games.

  2. Shouldn't the analysis also consider what is the objective of the RWC? I guess that, while there is a strong financial component, there is a host of other objectives including showcasing and popularizing the sport in new markets (or am I being too naive?). In addition, it would be interesting to see what is the effect of RWC revenues spent in smaller nations, particularly considering that that spending could be smaller starting with the next RWC.

  3. Upset appearances by the smaller teams might have led to increased interest in rugby in those countries, and been better for the game (and revenue!) in the long run. So even looking purely at financial objectives, the IRB may not have made a wise decision. It's just hard to quantify those kinds of benefits.

  4. Long term, a policy that is (perceived as) systematically unfair may well reduce the popularity and viewership of the sport.

    Being (perceived as) fair provides financial benefits, too. It's still a trade-off, of course, but fan distaste for an unfair schedule has to be part of the trade-off. So it's entirely appropriate for you to feel distaste.

  5. I'm imagining the Canadian reaction if the NHL's revenue sharing scheme were used as reason for screwing the minor teams in scheduling.